Instructions For Form 8582 - 2016 (Page 8 of 14) in pdf

figure the loss for the current year that

$15,525. $7,300 of the gain is section

Specific Instructions

isn’t limited by the PAL rules by

1231 gain reported on Form 4797,

multiplying your overall loss (which does

Part I, and $8,225 is ordinary recapture

Part I—2016 Passive

not include losses allowed in prior

income reported on Form 4797, Part II.

Activity Loss

years) by the following fraction:

On line 22 of Schedule E (Form 1040),

you report a total loss of $15,450, which

Use Part I to combine the net income

includes a current year $2,800 net loss

Gain recognized in the current year

and net loss from all passive activities to

and a $12,650 prior year unallowed

determine if you have a passive activity

Unrecognized gain as of the

loss. You have an overall gain from the

loss (PAL) for 2016. Use Worksheets 1,

beginning of the current year

disposition ($15,525 – $15,450 = $75).

2, and 3 to determine the entries for

Because you had an overall gain, you

lines 1–3 of Part I, as follows.

make the following entries on

Worksheet 1 is used for rental real

A partner in a PTP is not treated as

Worksheet 1. You enter the $15,525

estate activities with active participation.

having disposed of an entire interest in

gain on the disposition in column (a),

Worksheet 2 is used for commercial

an activity of a PTP until there is an

the current year loss of $2,800 in

revitalization deductions (CRDs) from

entire disposition of the partner's

column (b), and the prior year unallowed

rental real estate activities (with or

interest in the PTP.

loss of $12,650 in column (c).

without active participation).

Reporting an Entire Disposition

Worksheet 3 is used for all other

Example 2. Activity with overall

on Form 4797 or Form 8949

passive activities.

loss. You sell your entire interest in an

oil and gas limited partnership that was

If you completely dispose of your entire

If you need additional lines for

your only passive activity for a gain of

interest in a passive activity or a former

any of the worksheets, you can

TIP

$2,000. You have a current year

passive activity, you may have to report

either attach copies of page 2 or

Schedule E loss of $3,330 and a

net income or loss and prior year

3, whichever is applicable, or your own

Schedule E prior year unallowed loss of

unallowed losses from the activity. All

schedule that is in the same format as

$1,115.

the net income and losses are reported

the worksheet.

on the forms and schedules normally

Because you have an overall loss of

Worksheet 1

used.

$2,445 after combining the gain and

losses, none of the amounts are entered

Individuals and qualifying estates who

Combine all income and losses

on Worksheet 3 or on Form 8582.

actively participated in rental real estate

(including any prior year unallowed

You enter the net loss plus the prior

activities must include the income or

losses) from the activity for the tax year

year unallowed loss ($3,330 + $1,115 =

loss from those activities in Worksheet 1

to see if you have an overall gain or

$4,445) on Schedule E, Part II, column

to figure the amounts to enter on lines

loss.

(h), and the $2,000 gain on the sale on

1a through 1c of Form 8582. Don’t

Form 8949, in either Part I or Part II,

include any commercial revitalization

If you have an overall gain, report the

depending on how long you held the

deductions (CRDs) from these activities

income, losses, and prior year

partnership interest.

in the net income or loss reported in

unallowed losses on Worksheet 1, 2, or

Worksheet 1.

Disposition of Less Than an

Entire Interest

Don’t enter a prior year unallowed

If you have an overall gain and this is

loss in column (c) of Worksheet 1

a former passive activity, report all

Gains and losses from the disposition of

unless you actively participated in the

income and losses (including any prior

less than an entire interest in an activity

activity in both the year the loss arose

year unallowed losses) on the forms

are treated as part of the net income or

and the current tax year. If you didn’t

and schedules normally used and do

net loss from the activity for the current

actively participate in both years, enter

not use Form 8582.

year.

the prior year unallowed loss in column

If you have an overall loss when you

A disposition of less than

combine the income and losses, don’t

substantially all of an entire

Married individuals who file

interest doesn’t trigger the

use the worksheets or Form 8582 for

separate returns and lived with

CAUTION

the activity. All losses (including prior

allowance of prior year unallowed

their spouses at any time during

year unallowed losses) are allowed in

losses.

CAUTION

the tax year don’t qualify under the

full. Report the income and losses on

active participation rule and must use

Disposition of Substantially All

the forms and schedules normally used.

Worksheet 3 instead of Worksheet 1.

of an Activity

An overall loss from an entire

Column (a). Enter the current year net

You may treat the disposition of

disposition of a passive activity is a

income from each activity. Enter the

substantially all of an activity as a

nonpassive loss if you have an

total of column (a) on line 1a of Form

separate activity if you can prove with

aggregate loss from all other passive

8582.

reasonable certainty:

activities. When figuring your modified

adjusted gross income for line 7 of Form

1. The prior year unallowed losses,

Example. A Schedule E rental

8582, be sure to take into account the

if any, allocable to the part of the activity

activity has current year profit of $5,000

overall loss from the disposition of the

disposed of, and

and a Form 4797 gain of $2,000. You

activity.

enter $7,000 in column (a).

2. The net income or loss for the

year of disposition allocable to the part

Example 1. Activity with overall

Column (b). Enter the current year net

gain. You sell your entire interest in a

of the activity disposed of.

loss for each activity. Don’t enter any

rental real estate activity in which you

prior year unallowed losses in this

actively participated for a gain of

Instructions for Form 8582 (2016)

Instructions For Form 8582 - 2016 Page 8

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